July 26, 2019 - 7:20 AM EDT
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Phillips 66 Partners Reports Second-Quarter 2019 Earnings

HOUSTON

Highlights

  • Achieved record earnings of $233 million and adjusted EBITDA of $319 million
  • Increased quarterly distribution to $0.855 per common unit
  • Announced elimination of incentive distribution rights
  • Secured $1.3 billion project financing for Gray Oak Pipeline
  • Completed Lake Charles products pipeline
  • Announced construction of Clemens to Gregory (C2G) Pipeline

 

Phillips 66 Partners LP (NYSE: PSXP) announces second-quarter 2019 earnings of $233 million, or $1.15 per diluted common unit. Cash from operations was $276 million, and distributable cash flow was $254 million. Adjusted EBITDA was $319 million in the second quarter, compared with $281 million in the prior quarter.

“This quarter we had record earnings and advanced our major projects,” said Greg Garland, Phillips 66 Partners’ chairman and CEO. “Solid performance across our portfolio contributed to this quarter’s results. We secured project financing for Gray Oak Pipeline and progressed construction toward a fourth-quarter startup. In addition, we announced the C2G Pipeline project and completed the Lake Charles products pipeline.”

“This morning we announced an agreement to eliminate our general partner’s IDRs,” Garland continued. “This transaction reinforces PSXP as a premier MLP with an improved cost of capital and a simplified structure, along with its strong financial position and growth opportunities. Looking forward, we remain committed to delivering a competitive and growing distribution while balancing strong coverage and leverage ratios. Our portfolio of organic projects, as well as drop-down opportunities from Phillips 66, position us well for delivering continued growth.”

On July 17, 2019, the general partner’s board of directors declared a second-quarter 2019 cash distribution of $0.855 per common unit, a 14% increase over the second-quarter 2018 cash distribution. The Partnership has increased its distribution per common unit every quarter since its initial public offering in July 2013.

Financial Results

Phillips 66 Partners’ second-quarter 2019 earnings were $233 million, compared with $198 million in the first quarter of 2019. The Partnership reported adjusted EBITDA of $319 million in the second quarter, compared with $281 million in the prior quarter. The improvements are due to increased volumes on the Explorer, Bakken and Bayou Bridge joint venture pipelines, as well as increased volumes on wholly owned pipelines, driven by higher utilization at refineries operated by Phillips 66.

Liquidity, Capital Expenditures and Investments

As of June 30, 2019, total debt outstanding was $3.3 billion. The Partnership had $130 million in cash and cash equivalents and $749 million available under its revolving credit facility.

The Partnership’s total capital spending for the quarter was $114 million, which included $12 million of maintenance capital. Expansion capital of $102 million included spend on the Clemens Caverns expansion, the new isomerization unit at the Phillips 66 Lake Charles Refinery, the C2G Pipeline and the Lake Charles products pipeline, as well as investments in the South Texas Gateway Terminal and the Bayou Bridge Pipeline.

Strategic Update

The Partnership is constructing the 900,000 barrels per day (BPD) Gray Oak Pipeline, which is anticipated to be in service by the end of 2019. The pipeline will provide crude oil transportation from the Permian and Eagle Ford to Texas Gulf Coast destinations that include Corpus Christi, the Sweeny area, including the Phillips 66 Sweeny Refinery, as well as access to the Houston market. Phillips 66 Partners has a 42.25% ownership in the pipeline. The Gray Oak Pipeline joint venture has secured $1.3 billion of project financing.

The Gray Oak Pipeline will connect to multiple terminals in Corpus Christi, including the South Texas Gateway Terminal currently being constructed by Buckeye Partners, L.P. The marine export terminal will have two deepwater docks, with initial storage capacity of approximately 7 million barrels and up to 800,000 BPD of throughput capacity. Phillips 66 Partners owns a 25% interest in the terminal, which is expected to start up by mid-2020.

The Partnership is increasing storage capacity at Clemens Caverns from 9 million barrels to 15 million barrels in connection with the Phillips 66 project to add natural gas liquid (NGL) fractionation capacity at the Sweeny Hub. The caverns expansion is expected to be completed in the fourth quarter of 2020.

Phillips 66 Partners is also constructing the C2G Pipeline, a 16 inch ethane pipeline that will connect Clemens Caverns to petrochemical facilities in Gregory, Texas, near Corpus Christi. The project is backed by long-term commitments and is expected to be completed in 2021.

During the quarter, Phillips 66 Partners completed construction of the Lake Charles products pipeline that connects storage in Lake Charles to its Clifton Ridge Marine Terminal. This connection is expected to increase product export capability by up to 50,000 BPD from the Phillips 66 Lake Charles Refinery. The pipeline is backed by a long-term agreement that includes a minimum volume commitment.

The 25,000 BPD isomerization unit at the Phillips 66 Lake Charles Refinery was completed in July and is expected to ramp up to full production in the third quarter. The project increases production of higher-octane gasoline blend components. The project includes a long-term agreement with Phillips 66 for processing services with a minimum volume commitment.

The Sweeny to Pasadena Pipeline expansion project will add 80,000 BPD of pipeline capacity, providing additional naphtha offtake from the Sweeny fractionators. In addition, product storage capacity will be increased by 300,000 barrels at the Pasadena Terminal, and new connectivity will be added to third-party terminals. The project is expected to be completed in the second quarter of 2020 and will be backed by long-term agreements that include minimum volume commitments.

Investor Webcast

Members of Phillips 66 Partners executive management will host a webcast today at 2 p.m. EDT to discuss the Partnership’s second-quarter performance. To listen to the conference call and view related presentation materials, go to www.phillips66partners.com/events. For detailed supplemental information, go to www.phillips66partners.com/reports.

About Phillips 66 Partners

Headquartered in Houston, Phillips 66 Partners is a growth-oriented master limited partnership formed by Phillips 66 to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum products and natural gas liquids pipelines, terminals and other midstream assets. For more information, visit www.phillips66partners.com.

CAUTIONARY STATEMENT FOR THE PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This news release contains certain forward-looking statements as defined under the federal securities laws. Words and phrases such as “is anticipated,” “is estimated,” “is expected,” “is planned,” “is scheduled,” “is targeted,” “believes,” “continues,” “intends,” “will,” “would,” “objectives,” “goals,” “projects,” “efforts,” “strategies” and similar expressions are used to identify such forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements relating to Phillips 66 Partners’ operations (including joint venture operations) are based on management’s expectations, estimates and projections about the company, its interests and the energy industry in general on the date this news release was prepared. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Factors that could cause actual results or events to differ materially from those described in the forward-looking statements include the continued ability of Phillips 66 to satisfy its obligations under our commercial and other agreements; the volume of crude oil, refined petroleum products and NGL we or our joint ventures transport, fractionate, terminal and store; the tariff rates with respect to volumes that we transport through our regulated assets, which rates are subject to review and possible adjustment by federal and state regulators; fluctuations in the prices for crude oil, refined petroleum products and NGL; liabilities associated with the risks and operational hazards inherent in transporting, fractionating, terminaling and storing crude oil, refined petroleum products and NGL; potential liability from litigation or for remedial actions, including removal and reclamation obligations under environmental regulations; the failure to complete construction of announced and future capital projects in a timely manner and any cost overruns associated with such projects; and other economic, business, competitive and/or regulatory factors affecting Phillips 66 Partners’ businesses generally as set forth in our filings with the Securities and Exchange Commission. Phillips 66 Partners is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

Use of Non-GAAP Financial InformationThis news release includes the terms “EBITDA,” “adjusted EBITDA,” “distributable cash flow,” “coverage ratio,” and “adjusted capital spending.” These are non-GAAP financial measures. EBITDA and adjusted EBITDA are included to help facilitate comparisons of operating performance of the Partnership with other companies in our industry. EBITDA and distributable cash flow help facilitate an assessment of our ability to generate sufficient cash flow to make distributions to our partners. We believe that the presentation of EBITDA, adjusted EBITDA and distributable cash flow provides useful information to investors in assessing our financial condition and results of operations. Our coverage ratio is calculated as distributable cash flow divided by total cash distributions and is included to help indicate the Partnership’s ability to pay cash distributions from current earnings. Additionally, adjusted capital spending is a non-GAAP financial measure that demonstrates Phillips 66 Partners' net share of capital spending. The GAAP performance measure most directly comparable to EBITDA and adjusted EBITDA is net income. The GAAP liquidity measure most comparable to EBITDA and distributable cash flow is net cash provided by operating activities. The GAAP financial measure most comparable to our coverage ratio is calculated as net cash provided by operating activities divided by total cash distributions. The GAAP financial measure most comparable to adjusted capital spending is capital expenditures and investments. These non-GAAP financial measures should not be considered as alternatives to GAAP net income or net cash provided by operating activities. They have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. They should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP. Additionally, because EBITDA, adjusted EBITDA, distributable cash flow, coverage ratio and adjusted capital spending may be defined differently by other companies in our industry, our definition of EBITDA, adjusted EBITDA, distributable cash flow, coverage ratio and adjusted capital spending may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

Reconciliations of current quarter EBITDA, adjusted EBITDA and distributable cash flow to net income and net cash provided by operating activities, as well as adjusted capital spending to capital expenditures and investments are included in this release. Additionally, the disaggregation of adjusted capital spending between expansion and maintenance is not a distinction recognized under GAAP. We provide such disaggregation because our partnership agreement requires that we treat expansion and maintenance capital differently for certain surplus determinations. Further, we generally fund expansion capital spending with both operating and financing cash flows and fund maintenance capital spending with operating cash flows. We believe this is an important distinction in our liquidity profile.

References to EBITDA refer to earnings before interest, income taxes, depreciation and amortization.

Results of Operations (Unaudited)

Summarized Financial Statement Information

 

 

Millions of Dollars

Except as Indicated

 

Q2 2019

 

Q1 2019

Selected Income Statement Data

 

 

 

 

 

Total revenues and other income

 

$

401

 

 

 

423

 

Net income

 

233

 

 

 

198

 

 

 

 

 

 

 

Adjusted EBITDA

 

319

 

 

 

281

 

Distributable cash flow

 

254

 

 

 

226

 

 

 

 

 

 

 

Net Income Per Limited Partner Unit—Diluted (Dollars)

 

 

 

 

 

Common units

 

$

1.15

 

 

 

0.92

 

 

 

 

 

 

 

Selected Balance Sheet Data

 

 

 

 

 

Cash and cash equivalents

 

$

130

 

 

 

2

 

Equity investments

 

2,912

 

 

 

2,897

 

Total assets

 

6,544

 

 

 

6,353

 

Total debt

 

3,324

 

 

 

3,188

 

Equity held by public

 

 

 

 

 

Preferred units

 

746

 

 

 

747

 

Common units

 

2,555

 

 

 

2,523

 

Equity held by Phillips 66

 

 

 

 

 

Common units

 

626

 

 

 

600

 

General partner

 

(1,310

)

 

 

(1,315

)

Statement of Income

 

 

Millions of Dollars

 

Q2 2019

 

Q1 2019

Revenues and Other Income

 

 

 

 

 

Operating revenues—related parties

 

$

256

 

 

 

296

 

Operating revenues—third parties

 

7

 

 

 

6

 

Equity in earnings of affiliates

 

137

 

 

 

119

 

Other income

 

1

 

 

 

2

 

Total revenues and other income

 

401

 

 

 

423

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

Operating and maintenance expenses

 

85

 

 

 

139

 

Depreciation

 

29

 

 

 

29

 

General and administrative expenses

 

17

 

 

 

18

 

Taxes other than income taxes

 

9

 

 

 

11

 

Interest and debt expense

 

27

 

 

 

27

 

Total costs and expenses

 

167

 

 

 

224

 

Income before income taxes

 

234

 

 

 

199

 

Income tax expense

 

1

 

 

 

1

 

Net income

 

233

 

 

 

198

 

Less: Preferred unitholders’ interest in net income

 

9

 

 

 

10

 

Less: General partner’s interest in net income

 

71

 

 

 

69

 

Limited partners’ interest in net income

 

$

153

 

 

 

119

 

Selected Operating Data

 

 

Q2 2019

 

Q1 2019

Wholly Owned Operating Data

 

 

 

 

 

Pipelines

 

 

 

 

 

Pipeline revenues (millions of dollars)

 

$

117

 

 

 

109

 

Pipeline volumes(1) (thousands of barrels daily)

 

 

 

 

 

Crude oil

 

1,000

 

 

 

959

 

Refined petroleum products and natural gas liquids

 

995

 

 

 

768

 

Total

 

1,995

 

 

 

1,727

 

 

 

 

 

 

 

Average pipeline revenue per barrel (dollars)

 

$

0.64

 

 

 

0.70

 

 

 

 

 

 

 

Terminals

 

 

 

 

 

Terminal revenues (millions of dollars)

 

$

39

 

 

 

40

 

Terminal throughput (thousands of barrels daily)

 

 

 

 

 

Crude oil(2)

 

456

 

 

 

471

 

Refined petroleum products

 

809

 

 

 

736

 

Total

 

1,265

 

 

 

1,207

 

 

 

 

 

 

 

Average terminaling revenue per barrel (dollars)

 

$

0.33

 

 

 

0.36

 

 

 

 

 

 

 

Storage, processing and other revenues (millions of dollars)

 

$

107

 

 

 

153

 

Total operating revenues (millions of dollars)

 

$

263

 

 

 

302

 

 

 

 

 

 

 

Joint Venture Operating Data(3)

 

 

 

 

 

Crude oil, refined petroleum products and natural gas liquids (thousands of barrels daily)

 

772

 

 

 

687

 

(1) 

Represents the sum of volumes transported through each separately tariffed pipeline segment.

(2) 

Bayway and Ferndale rail rack volumes included in crude oil terminals.

(3)

Proportional share of total pipeline and terminal volumes of joint ventures consistent with recognized equity in earnings of affiliates.

Capital Expenditures and Investments
 

 

Millions of Dollars

 

Q2 2019

 

Q1 2019

Capital Expenditures and Investments

 

 

 

Expansion

$

102

 

 

195

 

Maintenance

12

 

 

15

 

Adjusted capital spending

114

 

 

210

 

Capital expenditures and investments funded by Gray Oak joint venture partners

 

 

422

 

Capital expenditures and investments

$

114

 

 

632

 

Cash Distributions

 

 

Millions of Dollars

Except as Indicated

 

Q2 2019

 

Q1 2019

Cash Distributions

 

 

 

 

 

Common units—public

 

$

49

 

 

 

47

 

Common units—Phillips 66

 

58

 

 

 

58

 

General partner—Phillips 66

 

70

 

 

 

69

 

Total

 

$

177

 

 

 

174

 

 

 

 

 

 

 

Cash Distribution Per Common Unit (Dollars)

 

$

0.855

 

 

 

0.845

 

 

 

 

 

 

 

Coverage Ratio*

 

1.44

 

 

 

1.30

 

†Cash distributions declared attributable to the indicated periods.

*Calculated as distributable cash flow divided by total cash distributions. Used to indicate the Partnership’s ability to pay cash distributions from current earnings. Net cash provided by operating activities divided by total cash distributions was 1.56x and 1.18x at Q2 2019 and Q1 2019, respectively.

Reconciliation of Adjusted EBITDA and Distributable Cash Flow to Net Income

 

 

Millions of Dollars

 

Q2 2019

 

Q1 2019

 

 

 

 

 

 

Net Income

 

$

233

 

 

 

198

 

Plus:

 

 

 

 

 

Depreciation

 

29

 

 

 

29

 

Net interest expense

 

26

 

 

 

27

 

Income tax expense

 

1

 

 

 

1

 

EBITDA

 

289

 

 

 

255

 

Proportional share of equity affiliates’ net interest, taxes and depreciation and amortization

 

29

 

 

 

26

 

Expenses indemnified or prefunded by Phillips 66

 

1

 

 

 

 

Transaction costs associated with acquisitions

 

 

 

 

 

Adjusted EBITDA

 

319

 

 

 

281

 

Plus:

 

 

 

 

 

Deferred revenue impacts*

 

(4

)

 

 

 

Less:

 

 

 

 

 

Equity affiliate distributions less than proportional EBITDA

 

13

 

 

 

9

 

Maintenance capital expenditures

 

12

 

 

 

9

 

Net interest expense

 

26

 

 

 

27

 

Preferred unit distributions

 

9

 

 

 

10

 

Income taxes paid

 

1

 

 

 

 

Distributable cash flow

 

$

254

 

 

 

226

 

*Difference between cash receipts and revenue recognition.

†Excludes Merey Sweeny capital reimbursements and turnaround impacts.

Reconciliation of Adjusted EBITDA and Distributable Cash Flow to Net Cash Provided by Operating Activities

 

 

Millions of Dollars

 

Q2 2019

 

Q1 2019

 

 

 

 

 

 

Net Cash Provided by Operating Activities

 

$

276

 

 

 

205

 

Plus:

 

 

 

 

 

Net interest expense

 

26

 

 

 

27

 

Income tax expense

 

1

 

 

 

1

 

Changes in working capital

 

(11

)

 

 

34

 

Undistributed equity earnings

 

(1

)

 

 

(2

)

Deferred revenues and other liabilities

 

1

 

 

 

(9

)

Other

 

(3

)

 

 

(1

)

EBITDA

 

289

 

 

 

255

 

Proportional share of equity affiliates’ net interest, taxes and depreciation and amortization

 

29

 

 

 

26

 

Expenses indemnified or prefunded by Phillips 66

 

1

 

 

 

 

Transaction costs associated with acquisitions

 

 

 

 

 

Adjusted EBITDA

 

319

 

 

 

281

 

Plus:

 

 

 

 

 

Deferred revenue impacts*

 

(4

)

 

 

 

Less:

 

 

 

 

 

Equity affiliate distributions less than proportional EBITDA

 

13

 

 

 

9

 

Maintenance capital expenditures

 

12

 

 

 

9

 

Net interest expense

 

26

 

 

 

27

 

Preferred unit distributions

 

9

 

 

 

10

 

Income taxes paid

 

1

 

 

 

 

Distributable cash flow

 

$

254

 

 

 

226

 

*Difference between cash receipts and revenue recognition.

†Excludes Merey Sweeny capital reimbursements and turnaround impacts.

 

Jeff Dietert (investors)
832-765-2297
[email protected]

Brent Shaw (investors)
832-765-2297
[email protected]

Dennis Nuss (media)
832-765-1850
[email protected]


Source: Business Wire (July 26, 2019 - 7:20 AM EDT)

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